I’ve been coaching Accountants around the world to run amazing businesses and achieve financial success for 24 years now. For as long as I can remember there has been a lot of discussion and advice given to the profession to ‘ditch the time sheets and get rid of the billable hour in the process’. 

In my experience, it’s bad bad advice. 

Getting rid of time sheets can cause more issues than it’s worth. I can count on 2 hands the number of firms I have met that have been better off for getting rid of time sheets. I lose track the number of firms who I have met who have already ditched time sheets and they are worse of for it. 

So I say – keep the time sheets but lose the charge rates!

Here’s why…

Let’s say you owned a formula one racing team. Your team only had data from the finish line. Your car did not have any reliable measurement methods other than did you win or lose the race. So you lost the race. Why? I don’t know, I wasn’t fast enough. But why weren’t you fast enough? I don’t know. 

What about the team that had all the gauges, dials and data feedback. Why did you lose the race the owner asks the manager of the team? We were carrying too much fuel towards the end. The tire pressure was too soft and the driver was too heavy. OK says the owner of the team – let’s fix those 3 things. 

Or what if you’re a pro golfer and the only measurement method was the scorecard. You didn’t win asks the coach – why not? I didn’t score low enough. But why did you not score low enough? No idea. 

Compared to the pro-golfer who measures everything. You didn’t win – why not? I’ve analyzed the data and I missed 32% of fairways and I only hit 65% of greens in regulation and I had 32 putts. I’ve worked out that my swing speed varied a lot so that’s why I missed the fairways. My iron play from 160 – 200 yards was not precise enough that’s why I didn’t hit as many greens as I should and my putting from 10 – 20 feet was all over the place. OK says the coach – let’s work on those 3 things. 

It’s the same with your Accounting firm.  

No time sheet firm. Coach Rob asks – how come your profit margin was only 28% before partner salaries? We’ve probably got too many people and they were probably inefficient but I don’t really know. 

Compared to (time sheet firm). Our profit was only 28% because 3 of our people were too inefficient, our average hourly rate on all of our client work was only $164 and we were carrying too much work in progress that we did not bill. Coach Rob say’s – well let’s work on those 3 things first then. 

With time sheets you can measure speed, efficiency, utilization, turnaround time, work in progress and average hourly rate – your margin. Without them all you have is the scorecard. 

But I didn’t say keep the hourly charge rates – they definitely need to go. An hourly charge rate is a very archaic way to value what you sell – your intellectual property.

You price up front based on value, you have an hours budget on the job, you record the time as $1 per hour and you do the job in the most efficient way possible.

The problem is using hourly charge rates multiplied by the time taken to get to the price – not the time recording system.